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Why German bank customers could soon pay less for their account

A major German bank is set to scrap fees on large balances - and a number of others look set to follow. Here's why people in Germany may be paying less for their savings or current account in the near future.

Woman with wallet
A woman looks in her wallet while grocery shopping. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

What’s going on? 

Interest rates have been at rock-bottom levels for years, making it much harder for people to get returns on their savings.

In recent years, many banks have even been levying what’s known as negative interest rates on customers. If interest normally incentivises people to save by helping them to grow their money, negative interest basically does the opposite.

If you have a certain amount of money in the bank, your bank will charge you negative interest via a deposit holding fee, which will usually be a certain percentage of your balance.

With N26, for example, balances of over €50,000 are subject to a 0.5 percent fee each year. For a balance of exactly €50,000, that equates to €250 in bank charges just for keeping your money there. 

Some banks even charge a deposit holding fee for balances as low as €5,000 or €10,000 in a current account. 

On Tuesday, ING Deutschland became the first bank to announce that it would be scrapping negative interest rates for the vast majority of its customers.

From July 1st, new customers of ING will be able to deposit up to €500,000 in their account without being charged for it, while existing customers will automatically have the fee-free amount raised to €500,000 from the current €50,000. 

Now, it seems a number of other German banks are planning similar moves. 

Why is ING Deutschland ending the holding fee?

Not entirely out of the goodness of its own heart – though that doesn’t stop it being good news for customers.

The European Central Bank (ECB) is set to make a decision on interest rates in the bloc this July, and most people expect that the bank is poised to increase interest rates from minus 0.5 percent to zero. 

Since banks have basically been passing on the ECB’s fees to their own customers, a hike in the ECB’s interest rate would spell the end of most negative interest-rate accounts in any case. But ING Deutschland said it wanted to pass on the positive interest rate trend to its customers even earlier.

READ ALSO: EXPLAINED: How to save money on your taxes in Germany

“With the increase in the fee-free allowance for credit balances on the current and extra accounts, the deposit fee is no longer applicable for 99.9 percent of our customers,” said Nick Jue, chief executive officer of ING in Germany. “We were one of the last banks to introduce a deposit holding fee and one of the first to virtually abolish it.”

He added that the bank had already kept its promise to abolish the holding fee for almost all customers before the European Central Bank made its decision.

Does this have anything to do with that court decision on bank charges?

That’s definitely a factor. According to a decision in Germany’s Federal Supreme Court last year, credit institutions have to obtain the consent of their customers when making changes to their fees and conditions.

That means that financial institutions have to ask for consent to current fees retrospectively if they don’t want hoards of people trying to claim their money back.

If a customer doesn’t consent to the fees, the bank will usually close that customer’s account.

Man signs a contract

A man in a suit fills in an official form. Photo: picture alliance/dpa/Pixabay | hnw-Gruppe

According to ING Deutschland, the scrapping of negative interest rates on balances up to €500,000 may help to sway those customers who have not yet agreed to the latest terms and conditions – including the deposit holding fee.

Anyone who agrees to the Ts&Cs will automatically be given the higher allowance as of July 1st.

“ING Deutschland expects that the increase in the allowances will convince in particular those customers who have not yet agreed to the General Terms and Conditions including the holding fee, and that the bank will thus terminate fewer customers than last planned,” ING said in a press release. 

READ ALSO:

What other banks are planning to do this?

According to reports in Bild and Bialo, the other banks planning on ending negative interest rates (or raising the threshold for fee-free balances like ING Deutschland has done) include:

  • Deutsche Bank
  • Commerzbank
  • Deutsche Apotheker- und Ärztebank (Apobank)
  • Dortmunder Volksbank
  • Hamburger Sparkasse (Haspa
  • Frankfurter Sparkasse
  • Frankfurter Volksbank
  • Mittelbrandenburgische Sparkasse
  • Nassauische Sparkasse (Naspa)
  • Ostsächsische Sparkasse Dresden
  • Sparda-Bank München
  • Sparda-Bank Südwest
  • Sparda-Bank West
  • Sparkasse Hannover
  • Sparkasse Pforzheim Calw
  • Volksbank Stuttgart

What does this mean for my savings?

There’s good news and bad news.

The good news is that, from July, you’ll no longer have to pay exorbitant charges just to store your money in a safe place – and you won’t be penalised for saving more. The bad news, on the other hand, is that low interest rates aren’t going away anytime soon.

So while you won’t be losing money hand over fist, you won’t be earning much of a return on your savings either.

Banks in Frankfurt

Skyscrapers in the financial district of Frankfurt am Main. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

“If the interest rate environment continues to develop positively, we will also let our customers participate in this development,” said ING Deutschland’s Nick Jue. “However, the low-interest phase will continue for the time being and broadly diversified investments will remain important.”

Getting a securities account where your money is invested is one way to try and grow your savings, as is investing in property.

Of course, people with mortgages and other loans benefit from the low interest rates – which could be why the German property market is currently booming. 

READ ALSO: Five ways Germany’s soaring inflation could affect your life

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TRAVEL NEWS

€9 for 90: Everything you need to know about Germany’s cheap travel deal

Germany's €9 monthly transport ticket is coming. Here's everything you should know about the deal that will allow you to to travel the country for next to nothing this summer.

€9 for 90: Everything you need to know about Germany's cheap travel deal

What’s all this about cheap transport?

Germany is about to launch a mega cheap transport ticket – and a lot of people are getting very excited about it.

The “€9 for 90” ticket is a monthly travel card that people can buy for just €9 per month over a three-month period. It’s a fraction of the price of a normal monthly travel card and – even more incredibly – can be used anywhere in the country on local and regional transport. 

The deal was initially announced back in April as part of an energy relief package put together by the government. And despite some anger from state leaders over funding for the scheme, the ticket cleared its final hurdle in the Bundesrat on Friday.

READ ALSO: German states threaten to block the €9 ticket in the Bundesrat

So far, the €9 ticket has received a lot of publicity and attention. That’s probably because it’s one of the more fun measures to combat the energy crisis – one that doesn’t involve complicated claims and write-offs in your tax return.

Instead, the government is hoping that the new ticket will cut monthly transport costs for households and encourage people to use more eco-friendly transport options. With fuel prices spiralling, it’s a great time to leave the car at home and travel around for next to nothing, while doing your bit for the environment. 

Sounds great. Can everyone buy it?

Yes! It doesn’t matter whether you’re a tourist on a weekend trip from Austria, a part-time Germany resident or Chancellor Olaf Scholz himself: everyone will be able to purchase the €9 ticket. (We imagine Olaf may already have his own transport, though.) 

It will, however, have your name on it, so it can’t be pooled between friends (as tempting as an even cheaper travel deal would be). 

READ ALSO: What tourists in Germany need to know about the €9 public transport ticket

Busy train in Stuttgart

People board a busy train in Stuttgart. Photo: picture alliance/dpa | Marijan Murat

When will it be available?

It’s currently available in a handful of cities, including Hamburg, Stuttgart and Freiburg – but everyone else will be able to purchase it from May 23rd onwards. 

The deal itself will be a summer travel offer. That means the first monthly ticket will be valid from June 1st and the last monthly ticket will expire on August 31st. Each of the tickets will be valid for the full calendar month so you won’t be able to mix and match with existing tickets.

For example, if you’ve already bought a ticket that’s expiring in mid-June, you wouldn’t then be able to buy a €9 ticket running from the middle of June to the middle of August.

Instead, you would require two €9 tickets  for June and July – though you can get a refund for the part of the prior ticket you didn’t end up using.

Where can I get hold of it?

The ticket will be available via Deutsche Bahn’s DB Navigator app, on the DB website, at in-station terminals and at ticket desks and offices.

Regional transport operators are likely to have their own ticket purchasing options as well – most likely online, but in some cases also at ticket machines and in-station offices. 

READ ALSO: How to get a hold of the €9 ticket in Berlin

A regional train near Hornberg, in the Black Forest.

A regional train near Hornberg, in the Black Forest. Photo: picture alliance/dpa | Philipp von Ditfurth

What types of public transport can I use it on?

The ticket is valid throughout Germany, but only on regional and local transport.

That means you can use it on all local trains like the U-Bahn and S-Bahn, as well as on trams and buses. You can also travel on the Regionalverkehr (regional trains) across Germany. 

You can’t use the ticket for private services like Flixbus and Flixtrain or on other long-distance rail services like IC, EC and ICE trains. If you’re travelling around your state and aren’t sure if the ticket will be valid, check if the train you’re taking has an ‘RE’ in the name. That’s the shorthand for regional trains.

It probably goes without saying, but taxi services won’t be included in the price. And, yes, you will still need to pay for those e-scooters as well. 

Can I use it to travel first class?

If you’re hoping for a month of budget transport but also want to be treated like royalty whilst on board, we may have to disappoint you. The €9 ticket can only be used in second-class carriages.

This is largely because there’s likely to be huge demand for the budget offer – so there could be scuffles for first-class seats with that extra bit of legroom. 

READ ALSO: How to explore Germany by train with the €9 ticket

I’ve already got an Abo. What can I do?

This has been a big concern for the folk who have already opted to pay full price for their public transport. (What fools they were…) 

Luckily, this group of keen transport users won’t miss out either. According to the DB website, people who’ve already shelled out on a monthly or annual ticket will be contacted by their local transport provider and informed about how they can get a refund.

If you’ve got a standing order set up, the transport operator will likely just debit the €9 from your account instead of the usual amount. Otherwise, you may get sent a refund via direct debit. 

Your subscription ticket will be valid for local public transport throughout Germany during the three month offer period – not just in your area.

Will students also benefit from the ticket?

Absolutely – though this is one area where things may be a little less well-organised. If you’re a student with a semester ticket, you will be entitled to a refund of the extra amount you paid, which will likely be handled by your university. 

One thing that seems a little unclear is whether the semester ticket will suddenly be valid outside of your local region, just like the €9 ticket is. We assume it will, but we’ll try to clarify this with DB and other service providers in the coming weeks. 

Can I take my bike on board?

Unfortunately, bikes aren’t included in the offer – and this seems like a deliberate choice. 

DB is recommending that people leave their bikes at home during the three months that the €9 ticket is on offer. This is because trains are likely to be extremely busy and they can’t guarantee that they’ll have room for everyone, let alone a hundred or so bikes. Instead, you can usually hire a bike at your destination.

However, if you’ve already got a subscription that allows you to take your bike with you (i.e. a student semester ticket or another type of Abo), you’ll still be able to do so. 

What about my dog? 

You will unfortunately not be able to purchase a €9 ticket in the name of Rover T. Dog (well, you could try, but it probably won’t work). However, the usual rules will apply to travelling with a furry friend. 

In some places, you may need to buy an extra dog ticket for Rover, while in others, he’ll be able to accompany you free-of-charge. 

READ ALSO: Who benefits from Germany’s €9 public transport ticket offer?

A woman carries her dog through a Berlin train station

A woman carries her onesie-clad dog in a Berlin train station. Photo: picture alliance/dpa | Annette Riedl

Do children need to pay for a ticket? 

Children under six can travel for free on public transport, while children over the age of six will need their own €9 ticket. 

What about seat reservations? 

Transport operators are trying to keep things as flexible as possible to cope with demand over summer, so you unfortunately won’t be able to use the ticket to reserve a seat in advance.

Won’t public transport be rammed? 

At the moment, nobody really knows. According to the Association of German Transport Companies (VDV), there could be as many as 30 million public transport users per month over summer – but this is only a rough estimate.

READ ALSO: How many people will use the €9 ticket?

One way around this is to try and travel on weekdays and off-peak services where possible and (as mentioned) to hire bikes rather than bringing them in the train.

It could also be helpful to familiarise yourself with different transport connections and routes in your area. 

The other thing that could help ease the crush on public transport is the fact that the government is also planning to cut taxes on fuel in tandem with the €9 ticket. That means that, for three months over summer, drivers will be able to get cheaper petrol and diesel – so some may indeed decide to take the car after all.

The ticket ends at the end of August. What happens next? 

Once again, it’s hard to say. Critics of the €9 ticket say that the scheme will leave gaping holes in transport budgets and could ultimately lead to ticket prices going up in autumn.

On the other hand, proponents of the offer believe that it could have the effect of luring people back to public transport after the Covid crisis. That would mean that more people would be buying subscriptions after summer and using local buses and trains, which can only be a good thing for transport budgets in the long-run. 

READ ALSO: ‘Fantastic’: Your verdict on Germany’s €9 transport ticket

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